AIG puts two life insurance units back on the block: WSJ

CEO Benmosche and Chairman Golub make up, newspaper adds

By

AlistairBarr

SAN FRANCISCO (MarketWatch) -- American International Group Inc. is putting two Asian life-insurance units back on the sales block, hoping to get roughly $5 billion for the businesses, The Wall Street Journal reported Thursday, citing unidentified people familiar with the matter.

The newspaper also reported that Chief Executive Robert Benmosche and Chairman Harvey Golub have resolved differences over the botched sale of AIG unit AIA Group to the U.K. insurer Prudential PLC (PRU).

AIG shares declined 1.6% to close at $33.88, leaving them up 13% so far this year.

AIG is trying to sell some assets to repay a massive government bailout that saved the company in late 2008 and early 2009.

However, late last year, the company put the sales of Japanese life insurers AIG Star Life Insurance Co. and AIG Edison Life Insurance Co. on hold. The decision was partly driven by the need to stabilize their businesses, according to The Wall Street Journal.

Since then, the performance of AIG Star and Edison, along with the deal-financing environment, have improved, the paper added, citing an unidentified person familiar with the matter.

'Natural buyer'

Prudential Financial
PRU, -0.47%
a big U.S. life insurance and annuity company that's not related to Prudential, "would be a natural buyer of the AIG segments," Suneet Kamath, an insurance analyst at Bernstein Research, wrote in a June 11 note to investors.

After Thursday's report that AIG put AIG Star and Edison back on the block, Kamath sent out the note to investors again.

Kamath estimated that Prudential Financial has about $1.3 billion of excess capital and could borrow more money, giving the company roughly $3.75 billion to use for acquisitions.

Based on AIG's deal to sell its Alico business to MetLife Inc.
MET, -0.76%
Kamath estimated that AIG Star and Edison could be sold for roughly $5 billion.

"This estimate assumes a 15% discount for Star / Edison relative to Alico to reflect the latter's superior growth profile, as well as the fact that AIG is arguably a more motivated seller following the cancellation of its planned sale of AIA to PRU UK," the analyst wrote.

Earlier this year, AIG agreed to sell AIA to Prudential for more than $35 billion, but Prudential shareholders balked at the price. AIG's board overruled Benmosche in deciding against revising the terms, including cutting the price, according to media reports.

Tensions increased in the AIG boardroom, but The Wall Street Journal reported Thursday that Benmosche and Golub have reconciled and now agree the insurer should work toward an initial public offering for AIA by the end of this year.

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